September 2008 - AIA Advocate for Absolute Returns

The AIA "Advocate For Absolute Returns", an on-line publication of The Association for Investor Awareness, Inc., tracks market trends, industry news, the SEC, global trade and finance and Washington developments for you because they affect your investments. But who doesn't? Many sources simply report these issues as abstract facts.

We feel that's not enough. The AIA Advocate's job is to warn you of what's important and how these developments translate to ground-level forces and threats that directly affect your wealth as well as your current investment opportunities. Not just information, but information you can use. Until next time…

  • Week of 09/25/2008

    In This Issue:

    Most Economists Believe The Rescue Plan Will Work
    Others Say It Will Only Postpone The Inevitable
    We Think The Optimists Are Right
    Meanwhile, Here's An All-Weather Investment Plan
    The Bottom Line This Week

    We've been suspicious for several weeks that Mother Market was not happy about taking a back seat to the recent Olympic games in China. To gain back some of the limelight she has been making bigger swings, jumps, and dives than anything we saw in Beijing. Her efforts are clearly working because nothing else has been able to push financial news off the front pages.

    Last week, the market made yet another volatility record, not that anybody wanted to see it. On four of the five days, prices changed over 300 points. Nevertheless, when the dust settled, and the bodies were swept up, the Dow was only down a miniscule 0.3%. The Nasdaq actually managed to rise 0.6%. If you happened to be in Transylvania during the festivities, you might not have known how much fun the rest of us had.

    The race for new records continued when the market opened on Monday of this week, and stocks dropped 373 points. Prices started to settle down on Tuesday and Wednesday when stocks fell 162 points and 29 points respectively. Given the circumstances, it is too much to hope that the high volatility will end anytime soon.

  • Week of 09/18/2008

    In This Issue:

    Stocks Plunged, But The Expected Crash Didn't Occur
    Many Investors Were Pleased To See Some Bailouts End
    A Recession Is More Likely, But It Isn't Assured
    Many Companies Are Having A Good Year
    It's Time For Bottom Fishers To Unfold Their Nets
    The Dollar Rebound May Be Over
    The Bottom Line This Week

    Looking back at the stock market of last week is like looking at the distant past. Compared to the big changes that have occurred since then, the five day period belonged to a different era. For the record, the Dow and the Nasdaq gained 1.8% and 0.2% respectively.

    As everybody knows by now, this week opened with a 504 point plunge after the government failed to find a buyer for Lehman Brothers. The news was a shock because investors expected a repeat of the Bear Stearns shotgun marriage to J.P. Morgan that prevented a stock market quake in March. When the rescue attempt for Lehman fell apart, many investors headed for the door.

    There was a brief rebound on Tuesday but stocks plunged another 449 points the next day. High volatility seems likely to continue for quite some time.

  • Week of 09/11/2008

    In This Issue:

    Feds Ease The Mortgage Threat, But Create New Problems
    Housing Is Now More Political Than Ever
    Top-Yielding CDs Blast Treasury Returns
    India's Outsourcing Stocks Are Again Attractive
    The Bottom Line This Week

    Two weeks ago, investors were inclined to ignore moderately bad news because they were focused on what looked like a coming economic recovery. Last Thursday, however, the optimism evaporated when the unemployment rate jumped unexpectedly. Rumors of additional problems with insolvent hedge funds added to the angst, as did growing worries about the king-sized problems at Fannie Mae and Freddie Mac.

    Investors put it all together and decided the outlook wasn't as encouraging as they first thought. In fact, it was starting to look as if a further economic slowdown could be in the works.

    When the new forecast made the rounds, the market dropped 345 points. We had a tepid 33 point rebound on Friday, but it fell into the faint praise category which actually deepened the gloom. When the final bell rang for the week, the Dow and the Nasdaq were down 2.8% and 4.7% respectively.

    Over the weekend, however, the outlook went from dead black to positively upbeat when Treasury Secretary Paulson announced his benevolent agency would rescue Fannie and Freddie. On Monday, jubilant investors pushed the market back up 290 points.

  • Week of 09/04/2008

    In This Issue:

    Growth Is Stronger Than Expected
    But A Slowdown May Be On The Way
    "The Economy" May No Longer Have Much Meaning
    There is Always Something That's Doing Well
    Hurricanes And Floods Won't Stop These Carriers
    Lower Interest Rates Seem Likely
    The Bottom Line This Week

    Last week investors proved once again that they are more resilient to bad news than we might expect. Although the Dow and the Nasdaq declined 0.3% and 1.5% respectively, those were mild reactions to the potential damage Hurricane Gustav could have done to America's energy infrastructure. If only one Gulf Coast refinery or oil rig had been knocked out, gas prices would have shot back up – and inflation would have quickly followed.

    It turned out that we dodged the bullet this time around, but Hurricane Hanna is coming up fast. Judging from the flat market we are having so far this week, the new storm is also of little concern on Wall Street.